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June 02, 2014

Limelight Networks, Inc. v. Akamai Technologies, Inc. (2014)

Today, in Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court determined that a defendant is not liable for inducing infringement of a patent under 35 U. S. C. § 271(b) when no one has directly infringed the patent under § 271(a) or any other statutory provision, and reversed a decision of the Federal Circuit finding that Limelight Networks, Inc. had infringed U.S. Patent No. 6,108,703.

The '703 patent, which is assigned to the Massachusetts Institute of Technology and is exclusively licensed to Akamai Technologies, Inc., is directed to a method of delivering electronic data using a content delivery network ("CDN"). The claimed method of the '703 patent calls for the designation of certain components (or "tagging") of a content provider's website to be stored on a server and accessed from those servers by internet users. Limelight operates a CDN and carries out several steps of the claimed method of the '703 patent, but instead of tagging components of its customers' websites, requires its customers to do their own tagging.

At trial, a jury found that Limelight infringed the '703 patent, and awarded Akamai $40 million in damages. However, following the Federal Circuit's decision in Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008), the District Court granted Limelight's motion for reconsideration of its earlier motion for judgment as a matter of law, concluding that Muniauction precluded a finding of direct infringement under § 271(a). In Muniauction, the Federal Circuit determined that direct infringement requires a single party to perform every step of a claimed method, and that this requirement is satisfied even though the steps are actually undertaken by multiple parties when a single defendant "exercises 'control or direction' over the entire process such that every step is attributable to the controlling party." In concluding that Muniauction precluded a finding of direct infringement in Limelight, the District Court determined that infringement of the '703 patent required tagging, and that Limelight did not control or direct its customers' tagging. The Federal Circuit affirmed, but following en banc review, concluded that the evidence could support a judgment in Akamai's favor on a theory of induced infringement, explaining that § 271(b) liability arises when a defendant carries out some steps of a claimed method while encouraging others to carry out the remaining steps.

Writing for a unanimous Court, Justice Alito notes that "our case law leaves no doubt that inducement liability may arise 'if, but only if, [there is] . . . direct infringement,'" citing Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961). While "[o]ne might think that this simple truth is enough to dispose of this appeal," the opinion indicates that "the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct in­fringement within the terms of §271(a) (or any other pro­vision of the patent laws), because direct infringement can exist independently of a violation of these statutory provi­sions." However, Justice Alito explains that "there has simply been no infringement of the method [of the '703 patent], because the performance of all the patent's steps is not attributable to any one person," and "where there has been no direct infringement, there can be no inducement of infringement under §271(b)."

In supporting the Court's decision, Justice Alito suggests that "[t]he Federal Circuit's contrary view would deprive §271(b) of ascertainable standards," and "require the courts to develop two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement." The opinion also notes that § 271(f)(1) reinforces the Court's reading f § 271(b), the former of which imposes liability on a party who "supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States." Justice Alito explains that § 271(f)(1) illustrates that "when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so," and states that "[t]he courts should not create liability for inducement of noninfringing conduct where Congress has elected not to extend that concept."

In support of the Federal Circuit's interpretation of § 271(b), Akamai argued that tort law imposes liability on a de­fendant who harms another through a third party, even if that third party would not himself be liable, and given the background tort principles against which the Patent Act of 1952 was enacted, it should not matter that no one is liable for direct infringe­ment in this case. The opinion, however, counters that "the reason Limelight could not have induced infringement under §271(b) is not that no third party is liable for direct infringement; the problem, instead, is that no direct infringement was committed" (emphasis in opinion). Akamai next argued that tort liability sometimes attaches where two or more defendants inflict injury, even if each defendant's conduct, standing alone, would not be actionable. But the opinion responds that in the instant case "under the Muniauction rule, [Akamai's] interests in the '713 patent have not been invaded."

In response to Akamai's attempts to analogize § 271(b) to the federal aiding and abetting statute (18 U.S.C. § 2), the opinion indicates that "[t]he analogy does not hold up," indicating that "[w]hile we have drawn on criminal law concepts in the past in interpreting §271(b), we think it un­likely that Congress had this particular doctrine in mind when it enacted the Patent Act of 1952, given the doctrine's inconsistency with the Act's cornerstone principle that patentees have a right only to the set of elements claimed in their patents and nothing further" (citation omitted). Akamai concluded by arguing that "[the Supreme Court's] interpretation of §271(b) . . . permit[s] a would-be infringer to evade liability by dividing performance of a method patent's steps with another whom the defendant neither directs nor controls." The opinion "acknowledge[s] this concern," but declares that "[a]ny such anomaly . . . would result from the Fed­eral Circuit's interpretation of §271(a) in Muniauction." Justice Alito concludes that:

A desire to avoid Muniauction's natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require -- an alteration that would result in its own serious and problematic consequences, namely, creating for §271(b) purposes some free-floating concept of "infringement" both untethered to the statutory text and difficult for the lower courts to apply consistently.

As for Akamai's request that the Court review the merits of the Federal Circuit's Muniauction rule for direct infringement under § 271(a), the Court declines the invitation, noting that the question presented clearly focused on § 271(b), not § 271(a), and therefore Limelight "did not address that important issue in its opening brief." Moreover, the Supreme Court's decision "necessitates a remand to the Federal Circuit, and on remand, the Federal Circuit will have the opportunity to revisit the §271(a) question if it so chooses."

Comments

As others have commented (see Patently-O and IPWatchdog), this statement in Alito's opinion (abysmal in other regards as well) is mind-boggling:

"What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent."

Rader's majority opinion in the Federal Circuit said no such thing. That Alito and the other 8 Justices of Our Judicial Mount Olympus believe that's what the majority opinion said is an embarrassing faux pas, making one question whether they actually read and bothered to understand it. Our Judicial Mount Olympus lives in a "glass house" and this nonsensical opinion by Alito is yet another reason they should stop "throwing rocks" at the Federal Circuit.